The Texas Residential Construction Liability Act: Notice Before Suing a Builder

What does the RCLA cover?

Every action to recover damages or other relief arising from a construction defect in a residence, whatever the legal theory, with a few exclusions (Tex. Prop. Code § 27.002). A construction defect is a deficiency in the design, construction or repair of a new residence, of an alteration, repair or addition to an existing residence, or of an appurtenance such as a garage, retaining wall or outbuilding (§ 27.001). Residence means a detached one- or two-family dwelling, a townhouse of up to three stories with its own exit, a duplex, triplex or fourplex, or a unit and the common elements in a condominium or cooperative. Apartment buildings held by an investor are not residences under the chapter.

Contractor is broad. It includes the builder who contracted with the owner, anyone who contracts to sell a new residence it built, and a person contracting with a condominium developer for new residences, and it extends to the contractor's owners, officers, directors, partners and employees. Subsequent purchasers who sue a builder are covered as well as the original buyer.

The chapter prevails over conflicting law, including the Deceptive Trade Practices Act and common law causes of action (§ 27.002(b)). It does not apply to personal injury, survival or wrongful death claims or claims for damage to goods, and it does not apply to claims for statutory fraud under Business and Commerce Code § 27.01, a contractor's wrongful abandonment of the project before completion, or misapplication of trust funds under Property Code chapter 162 (§ 27.002(d)). A homeowner whose builder walked off the job is outside the RCLA; a homeowner whose builder finished badly is inside it.

What notice is required before suit?

Written notice by certified mail, return receipt requested, to the contractor's last known address, sent at least 60 days before the claimant files suit or initiates arbitration, specifying in reasonable detail the construction defects that are the subject of the complaint (§ 27.004(a)). With the notice, or on request, the claimant must give the contractor any evidence that depicts the nature and cause of the defect and the extent of repairs needed, such as expert reports, photographs and video, to the extent it would be discoverable under Rule 192 of the Texas Rules of Civil Procedure.

Builders have their own notice duty. A written contract subject to the chapter, other than one between a condominium developer and a contractor, must contain a boldface statement that the contract is subject to chapter 27, that the owner must give the 60-day certified-mail notice before suing, and that the owner must allow inspection and cure if requested (§ 27.007). A contract missing that statement exposes the contractor to a civil penalty of $500 on top of any other remedy.

The inspection and offer timeline

The parties may agree in writing to extend any of these periods (§ 27.004(h)), and they often do when an engineer's report is pending. Every notice under the section goes by certified mail, return receipt requested.

Example

Suppose a Frisco homeowner finds water intrusion at several window heads two years after closing on a new house. Her attorney sends the builder a certified letter describing the locations, enclosing the home inspector's photographs and a moisture report. The builder requests an inspection, sends its flashing subcontractor and a consultant within the 35 days, and on the 55th day offers in writing to remove and re-flash the affected windows and repair interior finishes within 60 days of acceptance. The owner's consultant believes the problem is a missing weather barrier behind all the stucco, not just the windows, and she says so in writing within 25 days. The builder makes no supplemental offer. If a court later agrees the offer was unreasonable for the real defect, no cap applies to her recovery; if it finds the window offer was reasonable, her damages cannot exceed the fair market value of that offer and she recovers only the attorney's fees incurred before she rejected it.

What if the owner rejects a reasonable offer?

The recovery is capped. If the claimant rejects a reasonable offer, or does not permit the contractor or its independent contractor to inspect or make the repairs under an accepted offer, the claimant may not recover more than the fair market value of the contractor's last offer of settlement (or the amount of a reasonable monetary or purchase offer under the chapter), and may recover only the reasonable and necessary costs and attorney's fees incurred before the offer was rejected or considered rejected (§ 27.004(e)). If the contractor fails to make a reasonable offer, those limits do not apply (§ 27.004(f)).

Reasonableness is a fact question and the center of most RCLA trials. The builder argues that its scope matched the defects described in the notice; the owner argues the offer ignored the cause or covered only the visible symptom. A written agreement can let the contractor elect to repurchase the home when repair costs exceed an agreed percentage of its value, paying the original price, closing costs, improvements and moving costs, and such an offer is considered reasonable absent clear and convincing evidence to the contrary (§ 27.0042).

What damages can a homeowner recover?

Only economic damages proximately caused by the defect, and only those listed in § 27.004(g): the reasonable cost of repairs necessary to cure the defect; the reasonable cost to replace or repair damaged goods in the residence; reasonable and necessary engineering and consulting fees; reasonable temporary housing expenses during repairs; the reduction in market value after repair, to the extent the defect is a structural failure; reasonable and necessary attorney's fees; and arbitration filing fees and the claimant's share of the arbitrator's compensation. Mental anguish and exemplary damages are not on the list, which is one reason the chapter's priority over the DTPA matters so much to builders.

The owner must also prove that the defect existed when the construction, alteration or repair was completed and that it proximately caused the damages (§ 27.006). The contractor is not liable for damage caused by someone else's negligence, by the owner's failure to mitigate, maintain or give timely notice, by normal wear or normal shrinkage cracking within building standards, or by reliance on inaccurate official government records it could not have known were wrong (§ 27.003).

What if suit was filed without notice?

The case is abated, not dismissed. If the claimant did not give the required notice, the court or arbitrator must, after a hearing, abate the action so the parties can go through the notice, inspection and offer steps (§ 27.004(d)). Abatement is automatic beginning on the eleventh day after a verified motion to abate is filed, unless the claimant files a controverting affidavit before then. The claim is paused, not lost, but the owner has handed the builder the timetable.

Notice is excused when it is impracticable because suit must be filed to avoid limitations, or where the defect claim is a counterclaim. In those cases the pleading must specify each defect, the contractor may inspect by the 75th day after service, and the offer is due by the 60th day after service (§ 27.004(c)). An imminent threat to health or safety is handled separately: the contractor must take reasonable steps to cure it as soon as practicable, and if it does not, the owner may have it cured and recover the reasonable cost plus fees (§ 27.004(m)).

How this fits with other claims

The RCLA is a procedure and a damages rule, not a cause of action. The underlying claims are still breach of contract, breach of warranty, negligence or DTPA, and they must still be brought within the limitations and repose periods; statute of repose and limitations for construction claims covers the six-year residential repose period that took effect in 2023. Construction defect claims in Texas explains who is liable and on what theory. The RCLA notice and the DTPA's own 60-day notice are often sent in one letter; the 60-day DTPA notice letter describes that requirement. For whether a demand letter is required in other kinds of business disputes, see do I have to send a demand letter before suing in Texas.

Tina Wysk represents homeowners, investors and builders in residential construction disputes in Dallas–Fort Worth courts and arbitration.